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Court Rules Patents are Not Property for Takings Clause Purposes

Publications / Feb 03, 2019

Article by Clyde Shuman

A proposed class action lawsuit brought by a patent owner who challenged the constitutionality of patent claim cancellations in America Invents Act reviews has been dismissed by a judge in the U.S. Court of Federal Claims, who held that patents are not property under the Takings Clause of the Fifth Amendment to the Constitution.

In Christy Inc. v. U.S., case number 1:18-cv-00657 (Ct. Cl.), patent owner Christy Inc. argued that the invalidation of eighteen claims asserted in one of its patents in an inter partes review at the Patent Trial and Appeal Board (“PTAB”) effected a taking without just compensation in violation of the Takings Clause , a breach of contract and an illegal exaction. Granting the government’s motion to dismiss the complaint for lack of subject matter jurisdiction and/or failure to state a claim upon which relief can be granted, the court said that “patents are neither contracts nor property for Takings Clause purposes. Further, the Patent and Trademark Office did not illegally exact Christy’s funds.”

Christy’s lawsuit against the government, which would have included in the proposed class anyone who has had claims in a patent invalidated in an AIA review, was filed less than one month after the Supreme Court’s ruling, in Oil States Energy Services v. Greene’s Energy Group, that AIA reviews do not violate the Seventh Amendment’s right to a jury trial. Notably, the Supreme Court said there that its decision “should not be misconstrued as suggesting that patents are not property for purposes of the due process clause or the takings clause.”

Christy relied heavily on the Oil States ruling to argue its case to the Court of Federal Claims, but without success.

Noting that this was not the first time courts had addressed whether patents constitute property for purposes of the Takings Clause, the court, citing cases, said, “Congress has not expressed any intent that patent rights may be the subject of Takings Clause claims. Since patent rights derive wholly from federal law, Congress is free to define those rights (and any attendant remedies for an intrusion on those rights) as it sees fit.”

The court found that the Supreme Court’s decision in Oil States “does not disturb the principle that patents (including patent rights) are not property for Takings Clause purposes.” Addressing the Supreme Court’s statement there about patents and the Takings Clause, the court here said, “The [Supreme Court’s] decision does not suggest, as Christy champions, that patents are property for Takings Clause purposes. Indeed, the statement that Christy emphasizes merely defined the scope of the decision.” The court continued, “[T]he Supreme Court took no position in Oil States on the issue of whether patents were property for Takings Clause purposes because that matter was not before the court.”

On language in 35 U.S.C. § 261 that ““patents shall have the attributes of personal property,” the court said the rule is not absolute, “nor does it reflect Congress’s intent for patents to be treated the same as any other particular form of personal property.”

The court also rejected arguments based on nineteenth century Supreme Court decisions addressing land patents, and concluded that “patent rights are not cognizable property interests for Takings Clause purposes. In any event, patent owners have no property right to maintain patent claims that are found to be unpatentable, regardless of the timing of any such determination.”

The court dismissed Christy’s contract claims on similar grounds, noting that “Federal Circuit precedent is unequivocal: ‘[a] patent is not a contract.’”